Use Utilization Data to Increase Managed Care Reimbursement

January 24, 2011

When trying to negotiate a better rate with a payer, many providers often neglect to use an important set of data that oddly enough is right at their fingertips. Utilization data, which collectively reflects a provider’s clinical efficiency and in turn the value you bring to a payer’s provide network, is one stone that oftentimes remains unturned during contract negotiations.

In my opinion, providers should be able to get a fair rate based on what you bring to the table. However, there has always been a big problem with paying all physicians the same rate when they don’t drive costs the same. High-cost providers are almost always getting paid the same as low-cost providers with the same clinical outcomes, and that’s inherently unfair. The low cost providers are in fact making that payer money (i.e. profit). When was the last time a payer went to a provider and said “thanks for doing a good job, here’s a raise?” In a fee-for-service environment, I’ve never seen it in my career. To me, that’s a huge the problem with our health care system. There is no reward for quality efficient health care. Unfortunately Medicine is the one area where if you do a bad job, you don’t get fired – only sued.

Approach the payer for data

One big hurdle in using utilization data is getting this kind of data from the payer. Payers often stall or don’t give you all the information because it’s a tool for them to not allow an increase in rates. Payers don’t want word leaking out into the marketplace that they gave some physician practice a rate increase because they would get a flood of phone calls, and they just don’t want to get into that kind of politics. So be assertive and approach the payer for utilization data even if you anticipate rejection.

Ask for some kind of utilization report card. Ask the payer to tell you how your practice is doing with regard to the related cost drivers. Ask for a comparison to your peers about various criteria such as lengths of stay in the hospital, pharmacy costs, ancillary costs, costs per patient, and cost per particular diagnosis code, just to name a few. Rest assured, even though the payer may not want to share the utilization data with you, they have it. So if you can’t get any kind of utilization report card from them, you have to be ready with your own information.

Gather the data internally

First and foremost, providers should be creating and monitoring their own quality measures, such as cost per patient by leading diagnosis codes, inpatient lengths of stays, and referrals to specialists, just to name a few. Practices need to create a program for gathering this data, looking at it, and analyzing it, then meet with the payer and asking them, ‘Why are we getting paid the same as our competitors when we’re making you money?’

Think for your specialty how do you drive health care costs? What decision-making do you do that could lead to efficient health care or costly health care? So go first to your hospital’s own information system. Hospitals have very good information, but providers rarely utilize this. Next, look to your own medical practice billing and hopefully EMR system. Ideally, you can pull out data for a specific payer and calculate valuable utilization data, such as cost per patient. Before using any clinical data, make sure it is reviewed by a physician or physicians first – you want to get input on whether the data looks right. This promotes a system of checks and balances to make sure the data is complete and accurate.

Meet with the payer

Once you conduct this analysis, meet with the payer and present this utilization data to the payer and convey to them that you believe you drive costs lower than competitors in your network and in turn feel that you deserve some kind of price increase. Unfortunately while the data may spell out your efficiency in black and white, there are some payers who will still refuse to give an increase. Mr. Payer, if you are reading this article, you know who you are.

If any payer agrees with a physician that he or she is more efficient clinically and as a result, drives lower healthcare costs, but maintains, ‘We’re not going to give you a rate increase, then that payer is basically looking you in the eye and saying to the practice, to the employers, to consumers, to the companies that buy their insurance, and to competitors that they don’t give a damn about quality health care. So Mr. Employer, if you are reading this article, when was the last time you asked your insurance company their stance on quality healthcare and what are they doing to promote and reward it within their provider networks so you can get a reasonable premium rate?

Gathering utilization data may mean adding another task for your already full plate, but the time spent getting this information together for contract negotiations can produce rewards in the long run. I find that it doesn’t take much time, and ultimately it shouldn’t matter how much time it takes. Otherwise, you can’t continue to whine about reimbursement if you’re not willing to do what it takes to increase it or make it better.

Reed Tinsley, CPA is a Houston-based CPA, Certified Valuation Analyst, and Certified Healthcare Business Consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. His entire practice is concentrated in the health care industry. Please visit www.rtacpa.com